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Governor Janet Mills proposes raiding LePage liquor funds used for hospital debt

AUGUSTA – Lost in the debate around Governor Janet Mills’ lack of proposed funding for roads after saying “Let’s fix the damn roads!” in her recent State of the State address is a piece of her budget proposal that would begin to raid a cash reserve “lock box” built by Governor Paul LePage through one of his most notable accomplishments.

In 2013, Maine’s hospitals were mired in a financial crisis. The state had not been paying bills from those hospitals for services provided to the state’s Medicaid patients. In total, Maine’s hospitals were owed more than $500 million due to Maine’s failure to pay the bills. Several hospitals were in severe financial crisis and surviving on lines of credit as a result. Rural hospitals were on the way to closing their doors.

With little money available as he worked to fix a serious budget shortfall that had been perpetuated for years, Governor Paul LePage found an innovative solution. With the state’s liquor contract up for renewal, he would renegotiate the deal (which had been negotiated under Baldacci at a fire sale rate) and use the funds to secure a bond to pay off the hospitals.

In the previous deal under Governor John Baldacci, the state sold the ten-year liquor contract up front for $125 million. Under LePage, the state received $46 million in the first year and has maximized the value of the liquor contract to Maine taxpayers.

Beyond the difference in the success of the negotiation was that LePage’s proposal left the funds sitting in reserve as the bond used to pay the hospital debt was paid off. Under the LePage model, the fund was essentially a savings account that could be put to future use for a major initiative or set aside to bolster the state’s rainy day fund once the bond was paid off.

But now, Governor Janet Mills is proposing to start drawing down funds from the liquor revenue reserves before the bonds are paid off. The proposal, tucked into her latest state budget proposal, would send $20 million from the liquor contract cash reserves and send it to the general fund to continue growing government spending.

According to a debt summary published by the Maine State Treasurer, Maine owed $118.9 million on that bond at the end of June 2019.

The non-profit group Maine People Before Politics monitors Governor Janet Mills’ policy proposals and the state budget closely and they sounded the alarm on Mills’ proposal.

“Changing the law to allow Governor Mills to shift $20 million from the revenue bond, where it cannot be spent until the borrowing is paid off, to the General Fund is playing a shell game with our savings,” said Maine People Before Politics in a statement.

The liquor contract reserve fund is part of the record cash pool Governor Paul LePage built for the state, but it came under harsh criticism from some liberals, who believed the money should be spent, not saved.

On the other side of the debate are Republicans currently serving in the legislature. They have been highlighting that the growth Governor Mills has achieved in state budget spending has been accomplished with one-time funds or by spending every available dollar from the state’s surplus.

In Mills’ latest proposal she proposes adding more than $120 million to the state budget, but $46 million of that is through using one-time funds that will not be available in the next state budget.

Additionally, the most criticism of Mills’ latest budget proposal appears to be the result of lack of funding for roads and bridges.

During her State of the State address, Mills said “Let’s fix the damn roads!” -referring to Maine’s deteriorating infrastructure after she failed to increase funding for roads in her state budget last year – even canceling some road contracts.

In her new budget proposal, Mills proposes only adding another $10 million in funding for Maine’s roads, despite the Blue Ribbon Transportation Commission created by Mills saying the state is facing a funding gap of about $140 million per year. Many fear that Mills’ underfunding of roads is part of a political chess game she is playing to force one of several gas tax increases or toll proposals into law, which would drive up the cost to drive in Maine, especially for rural Mainers.

All the policy proposals in Governor Mills’ budget proposal will be considered by the Maine Legislature’s Appropriations Committee before a final state budget proposal is adopted. The committee is made up of eight Democrats and five Republicans.

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